SoftBank in talks to invest in FreeCharge

Freecharge could be valued at $700 million-$1 billion, making it one of the most richly-valued companies in the Indian startup ecosystem.Biswarup Gooptu&Madhav Chanchani | ET Bureau | October 06, 2016, 07:27 IST

Japan’s SoftBank Corp, the largest shareholder in Snapdeal, is in talks to invest in FreeCharge, the digital payments unit of the online marketplace, according to two people aware of the development.

The round is expected to see FreeCharge, which competes with Alibaba backed Paytm, take in $150-$200 million (Rs 1,000 crore-Rs 1,350 crore) with support also coming in from other investors.

Freecharge could be valued at $700 million-$1 billion, making it one of the most richly-valued companies in the Indian startup ecosystem.

“The founders have been eyeing a valuation of between $900 million-$1 billion,” said one of the sources cited above, on the condition of anonymity, adding that potential investors could buy stakes of 15%-25% in Delhi-based Freecharge Payment Technologies Private Limited, which operates Freecharge. Snapdeal and SoftBank declined to comment.

Multiple investment banks, including JP Morgan, have been helping the company with the fundraising effort.

The Indian fin-tech space has emerged as the hottest destination for investors — both, strategic and financial-- who have flocked to invest, lured by the potential of a large market with a population eager to adopt mobile technology for a range of transactions and services.

Besides online payments of utility bills and payments for purchases on Snapdeal, FreeCharge has also been aggressively pushing into offline payments at restaurants and retail outlets.

According to a study by Boston Consulting Group, digital payments in India are expected to reach $500 billion by 2020, with customers’ payments to merchants driving this growth.

In August, Paytm, India's largest wallet player whose founder Vijay Shekhar Sharma also has a payments bank licence, raised $60 million from Taiwan-based semiconductor maker MediaTek at a $4.8-billion valuation.

This was followed by South Africa-headquartered global payments solutions and transaction processing company Net1 UEPS Technologies Inc making a $40 million strategic investment in Delhi-based digital wallet player MobiKwik.

Then in September in one of the largest M&A's in the Indian startup world, South African media giant Naspers-owned payments firm PayU acquired Mumbai-based Citrus for $130 million.

The developments come almost a year after ET first reported that Snapdeal parent Jasper Infotech had begun talks to raise capital for FreeCharge, a company it bought for an estimated $400 million in a cash-and-stock deal in April 2015.

If successful, the deal could allay a number of concerns about Soft-Bank’s future bets in India following the departure of its president Nikesh Arora in June earlier this year. Arora was widely regarded as the prime mover behind the Japanese investor’s large bets in the country’s startup ecosystem.